Saturday April 27, 2013

Up close and personal with Tim Andriesen


EVER since his appointment as the managing director of agricultural commodities and alternative investments to the Chicago Mercantile Exchange (CME) in the third quarter of 2009, Tim Andriesen has been racking up frequent flyer miles, flying around the world.

It was just last month that Andriesen was in Malaysia to attend the Palm and Oils Conference & Exhibition: Price Outlook 2013. He tells StarBizweek how the CME group has developed during his time there and his craze for vintage car racing.

Of risk management, commodities and derivatives

In the 3 years or so that Andriesen has been with CME group, business has expanded. “CME has grown really well over the period that I've been there. We have pursued various product opportunities. Some of them are successful, some of them less so,” he says.

An interesting product, he says, that the CME group offers to customers is weather derivatives. The group has products that enable customers to manage weather-related risk, and also offer opportunities for speculation which absorbs the risk in exchange for possible profit on the variation in weather.

CME offers various weather derivative products related to temperatures, snowfall, frost and hurricanes. The products are exposed to weather conditions in more than 47 cities in the United States, Europe, Canada, Australia and Asia.

“These are all products that are really interesting in that there's a broad diversity of customers who have exposure to the weather. We all know that the weather can have an impact on our business, be it something like agriculture or a significant outdoor event,” Andriesen says.

One such contract is for snow removal. “We can't control the weather, but what we can control with these products is the financial impact of the weather,” he says.

Diverse derivatives

The CME group is by far the largest and most diverse derivatives exchange in the world, with futures and options on grains, livestock, oilseeds, dairy, lumber and many other benchmark products.

These are available either via the company's trading floors, its CME Globex electronic trading platform, and CME ClearPort clearing services for over-the-counter customers. Andriesen says the core responsibilities for an exchange are two-fold.

The first is to discover price, which means to understand the price for a commodity. The second is to facilitate risk transfer. “It's for people who doesn't want to have risk. They could be farmer, end-users or people focused on their business, but because of that business it creates risk.

Facilitating risk transfer means allowing them to transfer that risk to other market participants who want to take on that risk and who are doing that with the intention of trying to seek a return,” Andriesen explains.

Last year, Andriesen worked with the Ukrainian government and customers to help them develop the Black Sea Wheat Futures. The product was launched last year and is still in its beginning stages, he adds. The Black Sea region is a major exporting region, and is expected to continue growing but it is a place that lacks risk manager capability.

“It's traded a little bit but we're continuing work to get it to grow. So we think that's a something in the long term that will be very important,” he says.

Although Andriesen never expected to be in the commodities business, he thinks where he came from, East Central Illinois, a primarily corn and soybean area influenced his career path.

He had graduated from Southern Illinois University with a bachelor's degree in marketing with a specialisation in international business. In a tough job market, he took up a job that a grain company offered him. “I didn't know what a grain merchandiser was, but it came with a paycheck so I thought I'd give it a try,” he says.

So, starting from his time there, he learned about the business and agriculture.

Andriesen spent a good chunk of his career actually trading physical commodities in the domestic US market, ranging from corn, and beans to wheat.

“When you're a grain trader you're very much involved in risk management. It's understanding the risk around the positions you have,” he says.

Later on he ventured into the bank side of the business, working with several financial institutions in the OTC markets to develop risk management products for the bank's customers.

Importance of free markets

One of the things Andriesen and his wife aim to teach their four children is the importance of free markets and the role that they play. This is not necessarily so just in terms of futures, but also in terms of the importance of a market place in compensating people for meeting others' needs.

“We've always had a belief that the way that you're successful is that you understand what people are looking for and what their needs are and you deliver on that, and quite frankly, you work really hard too,” he says.

The work ethic of “Get out, work hard, and that will carry you all the way” has been nurtured since his children were still younglings.

For Andriesen, the biggest thing he continually tried to do is to be a good role model to others, especially to his children. “It's great to talk about things, free markets and how that works, but I think the most important thing is to lead by example,” he says.

Of course, there are days when doing that proves to be challenging.

Another value that Andriesen teaches his children is the fact that there is nothing easy in life. “I come from a generation and a place where we learned that there's nothing easy in life. Nothing is handed to you. Nobody owes you anything,” he says.

Opportunities for success are aplenty, but no one is owed this. He adds that it is one's job to find opportunities, and make things happen. He also believes that, that is what society wants. “You want a place where people that work hard, are honest, and create value, get something in return,” he says.

Whenever he is back in Chicago, where the CME headquarters are located, he often commutes with his eldest two children who are also working in Chicago.

Andriesen admits that he was an average kid, one who played sports, watched TV and just had fun.

Due to the amount of travelling he is required to do these days, he does not have a lot of time to do many of the fun things he used to do, like play tennis. Having said that, his interests and hobbies have evolved, he says.

“My hobby right now is racing cars,” he says.

Adrenalin-filled fun

One would think that racing cars is dangerous. Going at sound barrier-breaking speeds in a confined four-wheeler round a track, leaves little or no space for even teeny-weeny mistakes.

However, Andriesen begs to differ that the adrenalin-filled recreation is dangerous. “No it's not dangerous actually! Think of it this way. Where else would you want to have an accident? Number one: there are ambulances all over the place. Number two: you're in a car with a roll cage so it's almost impossible to hurt yourself. And you're belted in so you're not going anywhere,” he says.

Furthermore, the racing suit that drivers are required to wear has three layers of Nomex, which is a flame-resistant material. “So, if there's a fire, you're at least fireproof for a little bit,” he says.

He adds: “It's actually much less scary than driving on the Interstate some of the time.”

Andriesen is a member of the Checkered Past Vintage Racing group, and usually races at various racetracks in the Midwest during the summer months. In a week, he would get about six days of track time. Datsuns and Alfa Romeos are common cars one would see at these races.

He first got into the recreational sport when he lived in Australia. He took a 1996 Nissan Skyline GTR and did some track time. He has been hooked ever since.

“I race in what's called vintage historic, which is pre-1975 cars. I race a 1973 Datsun 240Z. It's very amateur. We go out and have fun, and we try not to wreck the cars, and just have a good time,” he says animatedly.

People refer to vintage racing as gentleman racing, he says. “You're a little less aggressive and really are a little more careful about trying not to wreck the cars. It's because you don't make any money from it, so when you break your car you have to pay for it,” he says.

Because many of these older car parts are hard to come by, an ongoing joke between him and the other racers is that the car parts are made out of “unobtainium”.

Last year, Andriesen had the opportunity to play the role of a driving instructor, in helping a friend out.

“Literally for two days, myself and some of the other guys I race with were called to be driving instructors. Like a Groupon thing, the driver only pays US$169 and gets three laps around the track in either a Ferrari F430 or a Lamborghini Gallardo. Our job was to sit next to them and make sure they didn't wreck the car, which was a little scary!” he says.

Ride the waves, dude

Andriesen thoroughly enjoyed the time he spent in Sydney when he served as managing director, commodities and commodities of National Australia Bank.

He had made friends with a surf photographer, who took pity on him for not being able to surf.

So Andriesen and his friend made it a point to meet every Wednesday morning at Manly Beach to surf. “Keeping in mind that he's really good, and me standing on a board and going forward was my definition of surfing,” he laughs.

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